The Definitive Guide to Swing Trading Stocks

The Definitive Guide to Swing Trading Stocks free pdf ebook was written by ADMIN on November 19, 2009 consist of 17 page(s). The pdf file is provided by www.swingtraderguide.com and available on pdfpedia since July 31, 2012.

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The Definitive Guide to Swing Trading Stocks 5.0 EditionIntroductionI have been involved in trading the securities markets for more than 20years. I remember when I first learned about stock trading: I thought itwas truly amazing to be able to make money from anywhere in the worldand all I needed was a computer, Internet access or a telephone. It is, inmany ways, the perfect business opportunity. It offers a multitude ofunique benefits:no employeeslow overheadno physical inventoryinstant liquiditymultiple ways to leverage capitalindependent of economyindependent of climateeasy to scaleeasy to automatefavorable tax considerationsthe ability to take time off at any timePeople are drawn to stock trading for many reasons. Yours might include:•••••Making additional spending incomeProducing capital for other investments, such as real estateSaving for your children’s educationBecoming self-employedBuilding your nest egg for retirementIn my library of stock trading books and courses, I have found that 90% ofthe information is the same, just rehashed in some way. Every book storein the country has stock trading books readily available so with such a highpercentage of traders losing money, you have to wonder how credible theinformation available in book stores really is. However, if I learned justone new thing, I considered each purchase worth my while. In this tradingcourse, I believe you will find not just one, but many things that willelevate your trading to new levels. In the chapters that follow, you willlearn some of the best techniques I have found for extracting profits fromthe stock market.It’s a well known statistic that 90% of traders lose money most of thetime. Lose some of their money, or even all of their money. Statistically,if you are reading this you are part of that 90%.What does it take to win??In his recent book ‘Outliers’ Malcolm Gladwell describes the 10,000-HourRule, claiming that the key to success in any cognitively complex field is, toa large extent, a matter of practicing a specific task for a total of around10,000 hours. 10,000 hours equates to around 4hrs a day for 10 years. Forsome reason most people that ‘try their hand’ at trading view it as a getrich quick scheme. That in a very short space of time, they will be able toCopyright 2002 -20010www.swingtraderguide.com4

The Definitive Guide to Swing Trading Stocks 5.0 Editionturn $500 into $1 million! The greatest traders understand that tradingmuch like being a doctor, engineer or any other focused and technicalendeavor requires time to develop and hone the skill set. Now you wouldn’tsee a doctor performing open heart surgery after 3 months on a surgerysimulator. Why would trading as a technical undertaking require less time.Trading success, comes from screen time and experience, you have to putthe hours in!Is there an alternative to the 10,000 hour rule?Well, yes and no. You can circumvent the process by learning fromsomeone who has already invested the 10,000 hours. Someone like me.However, you still must study and practice what I teach you until youperfect it for your own personality.REALIZE THIS: If an idea in this course can make you an extra$100 on your next trade, this course will have paid for itself! Butmy wish is that it pays for itself hundreds of thousands of timesover. With that in mind, prepare you brain to soak up everythinglike a sponge.I have written this guide in a very concise manner. You won’t find a lot ofanecdotal stories or hypothetical filler. I tell you what you need to knowand how I use it, along with plenty of examples of what I am talking about.I find this to be the easiest way to learn my methods.Here’s to your success in the markets!Kevin BrownAuthor/TraderSwingTraderGuide.comCopyright 2002 -20010www.swingtraderguide.com5

The Definitive Guide to Swing Trading Stocks 5.0 EditionWho Should Read This Guide?The Definitive Guide to Swing Trading Stockswas written for anyone whowants to learn easy and time-tested stock trading methods that aresuccessful inall stock sectors, all time frames, and all economies.Regardless of your motivation, at some point in time you need someone toteach you the ropes of stock trading, whether it is by seminar, videos, or awritten guide such as this one. There are lots of ways to make money inthe stock markets, but my experience has taught me that thesimplestmethods work best.The methods I use are driven by two principles:1. Abide by the IMMUTABLE LAWS of trading. (You will read about those inthe next section).2. Keep the trading SIMPLE.In general, I always try to keep things simple. Making stock trading morecomplicated than it really needs to be is the tendency for many“intellectual” traders, who eventually burn out. After all, it can’t be assimple as just picking up the phone or logging on to a website, placing anorder, and making money—can it? No, it’s not quitethatsimple. But youcertainly don’t need to stare at a screen all day, spend thousands of dollarsfor trading software, set up multiple computer monitors, purchase real-time data feeds, and subscribe to several advisory services.Throughout this guide, I will provide you with a double look at things. FirstI will show you what are conventionally considered to be “best practices,”so that you’ll be aware of them, Then I will give you my take on the samething and why I have taken that position. I think this is a more balancedapproach, and it’s fairer to you as a reader.Copyright 2002 -20010www.swingtraderguide.com6

The Definitive Guide to Swing Trading Stocks 5.0 EditionThe 5 Immutable Laws of TradingIf you’re like me, you may have been “taken” a time or two by overzealousor unscrupulous vendors offering stock trading information that may haveseemed a bit too good to be true—but you just had to find out for yourself.That need to “find out” was driven by some internal beliefs. Some of thoseare good; some are not. Over the years, I have come to understand a fewthings about the markets, and I’d like to debunk a few of the mostprevalent beliefs that are unfounded.My hope is that I can pull you alongside me, and we both can look out ofthe same window. To do this, you will need to relinquish (or at leastadjust) some beliefs you may have regarding trading and the stockmarkets.This guide contains many trading methods and their related “rules”. Beloware theimmutable lawsthat you must use to guide all of your decisions asa trader, regardless of whether you use my trading methods or not.Law #1: No “SECRET” method will workSo many trader educational offers out there supposedly reveal “little-known” or “secret” formulas for finding profitable stock trades. But here’sthe most important secret you need to know: NO trading method that istruly secret or little known will work. You must understand that the veryfirst requirement for making a profit is to make trades (long or short)involving stocks that everyone else is trading.Now think about this: If a method is secret, then very few traders areusing it. But it takes more than a few traders to move a stock price. Thepreponderance of buyers or sellers is what causes a stock to rally ordecline in the first place.Thus, many traders are suckered into thinking that there is some newmethod, system, technique, or indicator that no one else knows about,that will give them the winning edge. You don’t want to be a lone wolf witha winning edge in trading; you want to be part of the pack that’son theright side of the price moves.It is, always has been, and always will be, that plain and simple.Copyright 2002 -20010www.swingtraderguide.com7

The Definitive Guide to Swing Trading Stocks 5.0 EditionLaw #2: Price is the ONLY realityI mostly use price charts for determining when to enter and exit trades.This is otherwise known as “technical analysis”. Price charts are more thanjust current and historical references for a stock’s price; they are alsovisual representations of theopinionsof all active participants for thatstock.This is an important concept to grasp. If something important (positive ornegative) is going on in a company,someoneknows about it. If they knowabout it, they are going to act on it, and if they act on it—that is, placetrading orders for that company’s stock—it will be reflected in price.Since price is the indicator everyone uses to keep score in the market, thisis what I mostly pay attention to when it comes to money management,entries, and exits. I allow the price-sensitive rules of my methods todictate all actions.I’m still waiting for someone to disprove this fact. Nobody has yet beenable to show me that orders being placed for a stock DO NOT affect itsprice. Understand that this is not a single instance; it is a cumulativeeffect. But it is always present.Now, as it pertains to price movement, did you know that there’s only fourmarket-price occurrences possible? Although a plethora of technicalindicators have been isolated to measure these few occurrences, the onlypossible price changes aretrend continuations,trendcorrections,consolidations,andbreakouts.That’s it!All technical indicators or methods attempt to measure or capitalize on oneof these stock-price occurrences. With no fewer than 10 different ways tomeasure each one of these occurrences, you would have a minimum of 40different trading indicators, with more than3,628,800 possiblecombinations!3.6 million combinations of trading indicators is a vast number. Now youknow why so many trading books, courses, videos, and websites are outthere offering to teach you esoteric trading methods and secretinformation. They are merely measuring thesame thingsin millions ofpossible ways and calling it NEW and REVOLUTIONARY!This is also how some traders fool themselves. They create their ownindicators, find a consistent pattern, and believe they have foundsomething that nobody else knows about. But in fact, they’re measuringthe same price occurrence that others are measuring, only in a differentway.Copyright 2002 -20010www.swingtraderguide.com8

The Definitive Guide to Swing Trading Stocks 5.0 EditionLaw #3: A high percentage of winning tradesis NOT the answerThis is truly the hardest lesson to teach ANY trader. It certainly was thetoughest oneIhad to learn.So many trading gurus out there are pitching their amazing winningstreaks. Who wouldn’t be mesmerized by “90% winning trades” or “morethan150 winning trades in a row”? What they don’t tell you is that thewinning trade’s profits are so small that the few—but much larger—losingtrades and commissions tend to completely swallow the profits.In addition, there are any times where the more detailed statistics seem tobe curiously absent.What makes it even tougher is that we are trained from birth to think thatwe must win more times than we lose to be successful. As a trader, youmust learn to concentrate on what is important: the “size” of your averageloser versus your average winner.Here’s an example. I put ten bills on a table. Each is just a $1 bill. When Isay “go,” we both try to grab as many bills as possible and the person withthe highest dollar amount wins. Of course, in this scenario the ONLY wayyou can beat me is to grab more bills.Now, suppose I lay out ten bills again, but this time three of them are $20bills. Ahh . . . now you’ve got it! You can still win, even if you grab fewerbills. That is the essence of making money in stock trading.What if you could duplicate this over and over?Most trading-course offers are touted as set-it-and-forget-it trading“systems.” A trading system is a mechanical way of trading stocks, a hardand fast set of rules that must be followed each and every time. Noopinions or subjectivity are involved. Though I am not this rigid in my ownmethods, I do believe trading systems can be good for some traders. Thisguide includes a section to help you evaluate and construct tradingsystems. It also will show you how to calculate a positive, mathematicalexpectation for profit, using trading statistics.Copyright 2002 -20010www.swingtraderguide.com9

The Definitive Guide to Swing Trading Stocks 5.0 EditionLaw #4: Risk is ALWAYS presentYou must understand the fundamental fact that risk, as it pertains totrading or to anything else, can never be eliminated; the best you can do ismanageit. Even so-called risk-free investments, such as savings accounts,run a risk—that the cost of living will grow faster than the account balance.Good stock-trading strategies should always address the management ofrisk.There are only five ways to manage risk. Risk can be:•••••Avoided – A trader avoids risk by not entering the marketat inopportune times.Transferred – A trader transfers the risk to others byexiting positions.Reduced – A trader uses stop-loss orders to reduce risk.Distributed – A trader distributes risk by trading a numberof individual issues, rather than just one.Assumed – A trader assumes risk by entering a position orby not entering a position. In the second scenario, thetrader assumes the risk of lost profit opportunity.Copyright 2002 -20010www.swingtraderguide.com10

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